Knowing if a lawsuit is probable of having an adverse opinion against your company is communicated through the company's legal counsel. Accountants rely on information from the company's legal counsel, similar case experiences, other company’s similar case experiences, and management's responsive decisions to the lawsuit to determine probability outcomes. For lawsuits that have a probability of an adverse outcome, the Financial Accounting Standards Board (FASB) uses three areas of possibility. The three areas of probability are probable, reasonably possible, and remote. If the outcome is probable is must be accrued in the financial statements and disclosed in the footnotes. If the outcome is reasonably possible it is only disclosed in the footnotes. If the outcome is remote it can be ignored. In most situations, a single amount can be estimated, and this represents the loss that is accrued. In other situation, the loss may be estimate in terms of a range, for example, the range loss may
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